Payroll Accounting: Employee Earnings and Deductions
Jillian Diaz receives a regular salary of $1,500 a month and is entitled to overtime pay at the rate of one and one-half times the regular hourly rate for any time worked in excess of 40 hours per week. Diaz's overtime pay rate is
$12.98.
According to the assumption used in this text, employers are required to withhold Social Security taxes on the first ____ of each employee's earnings.
$128,400
For this text, it is assumed that the maximum amount of earnings subject to FICA taxes is
$128,400.
The payroll register for the week ended April 15 for Ultimate Tanning Spa indicates gross earnings of $4,000 and total deductions of $1,200. The journal entry for the payroll for this week would include which of the following credit amounts to Cash?
$2,800
Sandra Wilson is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Wilson's regular rate is $12 per hour. During the week ended July 3, she worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Wilson's overtime earnings for the week ended July 3 are
$294.
The payroll register for the week ended February 14 for Luxury Homes Construction Company indicates gross earnings of $4,000 and total deductions of $1,200. The entry for the Wages and Salaries Expense ending February 14 would be a
$4,000 debit.
The payroll register for the week ended May 28 for J & D United indicates gross earnings of $4,000 and total deductions of $1,200. The total of all the credit entries for the payroll for the week ending May 28 would be
$4,000.
Cameron Tiller is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Tiller's regular rate is $12 per hour. During the week ended March 15, he worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Tiller's total regular earnings for the week ended March 15 are
$480.
Joel Trump is paid one and one-half times the regular hourly rate for all hours worked in excess of 40 hours per week and double time for work on Sunday. Trump's regular rate is $8 per hour. During the week ended October 10, he worked 9 hours each day from Monday through Friday, 6 hours on Saturday, and 4 hours on Sunday. Trump's total earnings for the week ended October 10 are
$516.
Denise Cruz receives a regular salary of $900 a month and is entitled to overtime pay at the rate of one and one-half times the regular hourly rate for any time worked in excess of 40 hours per week. Cruz's overtime rate of pay is
$7.79.
The account, ___________ _____________ ____________ ____________ , should be credited for the total income tax withheld from an employee's earnings.
Employee Income Tax Payable
The account that should be credited for the total income tax withheld from employee's earnings is
Employee Income Tax Payable.
Form W-4 is a(n)
Employee's Withholding Allowance Certificate.
Payroll taxes withheld to provide Social Security and Medicare benefits are called _______________ _____________ .
FICA taxes
The ___________ ________________ ________________ _____________ requires employers to pay overtime at one and one-half times the regular rate to any hourly employee who works over 40 hours in a week.
Fair Labor Standards Act
An independent contractor performs a service for a fee and works under the control and direction of the company paying for the service.
False
Base and rate changes in payroll taxes such as FICA affect the accounting principles and procedures for payroll.
False
Compensation expressed in terms of hours, weeks, or units produced for skilled or unskilled labor is usually referred to as salary.
False
Compensation for managerial or administrative services usually is expressed in biweekly, monthly, or annual terms and is called wages.
False
Deductions for U.S. savings bond purchases, pension plan payments, and Social Security taxes are considered voluntary deductions.
False
Employees Income Tax Payable is a liability account that is credited for the FICA tax withheld from an employee's earnings.
False
Every individual who performs services for a business is considered to be an employee.
False
FICA taxes include amounts for Social Security but not Medicare programs.
False
Payroll expenditures represent a relatively small part of the total expenditures of most companies.
False
Pension payments are required deductions from an employee's gross earnings.
False
The Fair Labor Standards Act requires employees to pay double the regular hourly rate for the time worked on Saturday. True
False
The Medicare tax rate is subject to a maximum amount.
False
The Social Security Tax Payable account is debited for Social Security taxes withheld and Social Security taxes imposed on the employer.
False
The employee's earnings record is a summary of the earnings of all employees for each pay period.
False
The payroll register is a summary of the annual earnings of each employee.
False
The payroll register replaces the general journal in most businesses.
False
Under federal law, employers are required to withhold a percentage of the employees' wages for pensions.
False
The act that requires most employers to withhold certain amounts from employees' earnings for contributions to the Social Security and Medicare programs is called the
Federal Insurance Contributions Act.
The account that is credited for the Medicare tax withheld from employee's earnings and the Medicare tax imposed on the employer is
Medicare Tax Payable.
The account that is credited with amounts withheld from an employee's earnings for any pension plan contribution is
Pension Plan Deductions Payable.
_______________ _______________ provides pensions and disability benefits.
Social Security
The _____________ ___________ _______________ _______________ account is credited for the Social Security tax withheld from an employee's earnings.
Social Security Tax Payable
A purely manual system of record keeping is one in which all records, journals, and ledgers are prepared by hand.
True
A withholding allowance exempts a specific dollar amount of an employee's gross pay from federal income tax withholding.
True
An electronic payroll system is one in which data is processed using computers equipped with payroll software.
True
An employee's total earnings is referred to as gross pay.
True
Both manual and electronic payroll systems require the same payroll input and output.
True
Companies must accumulate payroll data both for the business as a whole and for each employee.
True
Employers may use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay.
True
Employers primarily use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay.
True
Government laws and regulations regarding payroll are much more complex for employees than for independent contractors.
True
In an electronic system, only the employee number and hours worked need to be entered into a computer each pay period.
True
Plastic cards or badges encoded with basic employee data are now being used in computer-based time keeping systems.
True
Separate accounts are kept for each type of earnings deduction.
True
The Federal Insurance Contributions Act requires employers to withhold FICA taxes from employees' earnings.
True
The difference between an independent contractor and an employee is an important legal distinction.
True
The earnings base, against which the FICA tax is applied, and the tax rate have been changed several times since the law was first enacted and can be changed by Congress at any time in the future.
True
The journal entry to record payroll transactions for the accounting period is to debit Wages and Salaries Expense for the gross pay and credit the appropriate liability and cash accounts.
True
The various government laws and regulations regarding employee deductions, employer payroll taxes, payroll records, and payroll reports apply only to employees and not to independent contractors.
True
Tracing the employee's gross pay for a specific time period into the appropriate wage-bracket table provided by the Internal Revenue Service is called using the wage-bracket method to determine the amount of tax to be withheld from an employee's pay.
True
Under federal law, employers are required to withhold certain amounts from the total earnings of each employee to be applied toward the payment of the employee's federal income tax.
True
Unless an employer has only a few employees, manual systems can be inefficient.
True
Whether the wage-bracket method or some other method is used in computing the amount of tax to be withheld, the sum of the taxes withheld from an employee's wages is only an approximation of what the employee's actual taxes will be for the year.
True
Each employee is required to furnish the employer with which of the following forms?
W-4
______________ are compensation for skilled or unskilled labor.
Wages
The account that is debited for the total amount of the gross earnings of all employees for each pay period is
Wages and Salaries Expense.
Examples of employees include all of the following EXCEPT a. attorneys. b. plant supervisors. c. accounting clerks. d. secretaries.
attorneys.
When a single-check for payroll is prepared and deposited into a special payroll bank account, which of the following entries is made to record the deposit?
debit Payroll Cash; credit Cash
With ______________ ________________, the employee does not handle the paycheck; payment is made by the employer directly to the employee's bank.
direct deposit
A(n) ______________ _________________ is a computerized system based on a software package that performs all payroll record keeping and prepares payroll checks.
electronic system
A separate record of each employee's earnings is called a(n)
employee earning record.
A separate record of each employee's earnings is known as a(n) _____________ _________________ ________________ .
employee earnings record
An employee's total earnings are also known as _____________ _____________.
gross pay
Someone who performs a service for a fee and does not work under the control and direction of the company paying for the service is known as a(n) ___________________ __________________ .
independent contractor
Any person who agrees to perform a service for a fee and is not subject to the control of those for whom the service is performed is called a(n)
independent contractor.
Gross pay less mandatory and voluntary deductions is called ____________ ____________.
net pay
The needs of management and the requirements of various federal and state laws make it necessary for employers to keep records that will provide all of the following information for each employee EXCEPT: a. gross amount of earnings, date of payment, and period of employment covered by each payroll. b. number of hours the employee works as a volunteer for the community. c. gross amount of earnings accumulated since the first of the year. d. name, address, and Social Security number.
number of hours the employee works as a volunteer for the community.
Federal income tax that is withheld each pay period from the employee's earnings is NOT based on the
number of sick days.
The Fair Labor Standards Act provides which of the following minimum rates to be paid to employees for all hours worked over 40 hours per week?
one and one-half times the regular rate
The form used to assemble the data required at the end of each payroll period is the _______________ ______________.
payroll register
Employers usually prepare which of the following types of payroll records?
payroll register, employee earnings record, and payroll check
A multi-column form used to assemble, compute, and summarize data for all employees at the end of the payroll period is a(n)
payroll register.
Compensation for managerial or administrative services is called ____________.
salary
Compensation normally expressed in biweekly, monthly, or annual terms for managerial or administrative services is called
salary.
The outputs from a manual or an electronic payroll accounting system include all of the following EXCEPT a. a payroll register. b. time cards. c. an employee earnings record. d. payroll checks.
time cards.
The __________-____________ ______________ requires employers to determine the amount to withhold from an employee's gross pay for a specific time period from the appropriate wage-bracket table provided by the Internal Revenue Service.
wage-bracket method
A(n) ___________________ ___________________ exempts a specific dollar amount of an employee's gross pay from federal income tax withholding.
withholding allowance
An amount of an employee's gross pay which is exempt from federal income tax withholding is a(n)
withholding allowance.
